For many prospective parents who have dreamed of adopting a child, the cost of adoption can be a tough hurdle to face, but it doesn’t have to be a barrier keeping them from their hopes of parenthood. The federal adoption tax credit can help ease the burden of qualifying adoption expenses. Learn more about the adoption tax credit, how it works, and how it can offset adoption costs, so you can work toward completing your family.
Adopting a child can be a costly process, and the federal adoption tax credit is a way to alleviate some of the financial burden associated with those costs. Consider the credit as a dollar-for-dollar reimbursement on qualified adoption expenses that can be used to reduce your tax liability for the year. For any taxes owed, the federal adoption tax credit can be applied toward that balance, reducing the amount.
The big difference between the adoption tax credit and a tax deduction is where and how each is applied. A tax credit is a dollar-for-dollar reduction of taxes owed. A tax deduction, on the other hand, is applied toward your taxable income, meaning that the amount that can be taxed is reduced. Many find a tax credit preferable in that the amount is directly applicable toward taxes owed.
While the federal adoption tax credit applies nationwide, some states have their own adoption tax credits that may be applicable in addition to the federal credit. Contact a tax professional in your state for more information on state adoption tax credits.
The federal adoption tax credit amount is adjusted yearly, with its maximum allowance growing annually with rising costs of living. For 2024, the maximum amount available for the adoption tax credit is $16,810 per child. This means that for taxes filed in 2025, a credit up to that amount, based on qualified adoption expenses, can be applied toward any taxes owed. If the full amount of the adoption credit for taxes exceeds the amount owed, the excess balance can be carried over for up to five years.
No, the federal adoption tax credit is not refundable. It must be used toward tax liability for the tax year in question. If your adoption tax credit is more than of your liability, the remaining credit balance can be applied to future liability for up to five years.
Yes, there is a maximum income limitation adoptive families cannot exceed in order to be eligible for the federal adoption tax credit. This limitation is based on a household’s modified adjusted gross income (MAGI). For adoptive families whose MAGI falls beneath or equal to $252,150 in 2024, they are eligible for up to the total adoption credit amount. For families who exceed this income but fall beneath $292,150 in 2024, they are eligible for a partial adoption tax credit. Any families equal to or exceeding a MAGI of $292,150 are ineligible to receive the credit. For more information on federal adoption tax credit qualifications, restrictions, and limitations, please consult your trusted tax professional.
| Under or Equal to $252,150 | Eligible for full adoption tax credit |
|---|---|
| Between $252,151 and $292,149 | Eligible for partial adoption tax credit |
| $292,150 or More | Ineligible for adoption tax credit |
In order to take advantage of the maximum adoption tax credit allowance, it’s crucial for adoptive families to save all receipts, invoices, and documentation for all adoption-related expenses. Each qualified adoption expense will need to be listed on the appropriate tax form in order to benefit from the tax credit.
While most adoption-related costs are covered by the adoption tax credit, financial support or assistance provided to birthmothers is typically ineligible.
In order to claim the federal adoption tax credit, prospective parents need to complete Form 8839 to determine the amount that can be credited toward taxes owed. Once completed, this should be attached to the appropriate tax return form. For more about how to calculate and apply for the adoption tax credit, please consult a trusted tax professional.
In order to claim the adoption tax credit, adoptive parents need to have the following documentation available:
*It can take up to six months or more after finalization before a social security number is received for an adopted child. In the event that adoptive families file for the federal adoption tax credit prior to receiving one, they can consult with a tax professional about applying for a temporary adoption tax ID number.
Yes, adoptive parents can claim the adoption tax credit for a disrupted adoption or one that hasn’t been finalized yet. In many cases, adoptive parents may have to wait a certain amount of time after the disruption before claiming the credit. For adoptive parents who experienced more than one disruption in any given year, the total maximum allowance applies for both or all disrupted adoptions, regardless of how many have occurred.
For families who experience a disruption and then a successful domestic adoption placement, claiming the adoption tax credit for the disruption can interfere with the credit for the placement. Any credit received for the disruption will likely be subtracted from what would be received on the placement.
If an adoption hasn’t been finalized yet, families and prospective parents can claim the adoption tax credit for the following year. For the current year, families and parents may be able to claim some qualified adoption expenses made in the previous year.
Yes, you can still claim the federal adoption tax credit, but there are some important points and caveats to consider.
Simply put, the adoption tax credit is claimed per child, per tax year. If multiple children are adopted in the same year, adoptive parents and families can claim the credit per child adopted in the same year. If parents already used the adoption tax credit on their first child and choose to adopt again, even if it’s a year or more later, the credit can also be claimed again for the most recent child. Note that more than one required form 8839 may be needed in this case.
Between adoption requirements and the often high costs of adoption throughout the process, the road to welcoming a newborn into your life can seem challenging. However, through incentives like the federal adoption tax credit and other financing options, like adoption loans, help is available. For more information regarding the adoption tax credit, please contact your trusted tax professional. For all other inquiries into the adoption process, get in touch with us. With over 25 years of experience, we’ve united thousands of families and made dreams come true.
Contact Us TodayPlease Note: The information provided on this page regarding the adoption tax credit is intended for general informational and guidance purposes only and should not be construed as professional tax advice. Tax laws and regulations are complex and subject to change, which can have significant implications for your individual situation. We encourage you to consult with a qualified tax professional to obtain the most accurate and tailored advice applicable to your specific circumstances.
